Nightmare on Main Street

In March 1973, a fire started in a small access panel of a textile manufacturing room. Without properly functioning sprinklers, the fire spread, engulfing a key area of the facility. With no contingency plan and business interruption strategy in place, the company couldn’t adequately service its customers, leading to an irrevocable loss of market share. Wabasso, and its community, never fully recovered.

Every day brings news of disasters. Some make the news globally, like the Japanese earthquake and tsunami or the recent typhoon that devastated the Philippines. Others are more localized, perhaps affecting but a single company. Beyond the headlines of each one, however, is a story told much less frequently, the story of recovery, of getting back up and running—a story often full of daunting and unexpected challenges, as well as disappointment and heartbreak.

Four decades ago, FM Global helped document the impact of a fire along with the aftermath and recovery effort at an insured member company, Canadian textile maker, Wabasso Ltd.

Wabasso, based in Trois-Rivières in the province of Quebec, Canada, had made many investments designed to prevent just such a disaster. While some parts of the plant were designed and constructed in the early twentieth century, the newer buildings were of a single-story configuration. Sprinklers were placed throughout the complex.

It was a prosperous operation, benefiting from a strong economy in the midst of a cycle of expansion. On a day-to-day basis, bales of cotton and other raw material were delivered to the company’s highly integrated manufacturing process by a stream of Canadian Pacific railroad cars. In a well-oiled process, raw material was subjected to spinning, spooling, weaving, bleaching, washing, printing, cutting, sewing and, eventually, packaging and shipping to customers across Canada.

An Open and Shut CaseOne day in March 1973, the company’s machinery ground to a halt, literally and figuratively. All it took for the company to become the dominant news story in Le Nouvelliste newspaper in Trois-Rivières was the decision to shut a valve—a single valve. Then, unpredicted and unexpected: a fire. While the buildings had been fully sprinklered and the facility adequately protected, a control valve had been shut temporarily due to the expansion project on site. It seemed like a reasonable decision—a short-term situation that no one saw fit to reconsider or deemed worthy of actively monitoring. After all, what were the chances?

Unfortunately, nobody counted on trouble in the heat set machine, which was routinely used to finish synthetic fabrics using steel rollers heated to a blistering 400ºF (204ºC). To this day, no one is quite certain what went wrong, but on that particular day, while operators were on a lunch break, something malfunctioned or perhaps an accumulation of textile material in the machine overheated and began to smolder.

When the machine operator, Louis Pothier, returned from lunch and opened an access panel to check on the machine’s burners, he was knocked back by a surge of flames. Thinking fast, he grabbed a fire extinguisher and shouted for help. However, even when two colleagues joined the battle, it was already too late. Flames were lapping the wooden planks of the floor above and starting to spread to nearby supplies and equipment.

The closed valve prevented sprinklers from emitting their customary stream of frigid droplets, which could have contained or even extinguished the blaze. Soon, the flames spread, creating a firestorm.

Although the Trois-Rivières firefighters arrived within minutes, they were already too late. Indeed, the company general manager, A.J. Fyfe, who was returning to the area when the blaze started, recalled seeing the smoke and glow on the horizon and realizing that Wabasso was facing a true disaster.

It was 24 hours before firefighters finally left the scene. When they did, most of the facility was either in ruins or out of commission.

The ConsequencesAlthough the company was well insured by FM Global, and had carefully assessed the value of its facility, the real consequences of a major disaster had not been fully considered. H. Roy Crabtree, chairman of the board, recalled that, up until the time of the fire, management had been looking forward to a good year, as new equipment came online and demand for products continued to surge.

The fire undid those calculations. The main building loss amounted to 200,000 square feet (18,581 square meters) of floor space and millions of dollars in updated production equipment, including the huge heat set machine where the trouble started. All together, some US$4.5 million (US$21.3 million today) in finished product and packaging supplies were destroyed, along with much of the sewing department, located on the floor above. The structure was also a physical linchpin for the entire complex. Its loss disrupted steam and utility connections and the physical movement of product and people. Furthermore, the loss of all of the critical “finishing” operation, which supplied cloth to the printing department, effectively crippled most production activities for the whole company.

The AftermathAfter the fire, the challenge for Wabasso was threefold. First, and foremost, operations had to be restored as much as possible using temporary expedients to keep at least some of the business going and cash flowing. Simultaneously, the company needed to evaluate what could be saved or repaired (and what needed to be discarded). Finally, the company needed to develop plans for a replacement facility immediately.

“Our first priority was to get back in operation. We had about 1,000 people out of work,” said R.G.H. Knight, vice president of operations. “You think because you have insurance that you are well protected against any eventuality, [but] having insurance is only a means for getting some money; the problems of reconstruction fall on the people involved,” he added.

Almost from the moment the fire was extinguished, ad hoc efforts to repair and restore the facility had begun. One of the first challenges was reconnecting the powerhouse to the rest of the plant. Extrapolating from the techniques sometimes used to pass a line between ships at sea, the chief of maintenance services at Wabasso somehow procured a bow and arrow and someone proficient in its operation. Using this simple device, a small line was passed across the smoldering ruins. From this one connection, ever larger cords were pulled across until one of sufficient strength was available to hoist over replacement electrical power lines. This simple expedient got temporary power in place rapidly. Similarly, about 1,000 feet (304 meters) of piping was extended outdoors to link the power plant to buildings needing steam for process heat and to maintain a comfortable work environment.

Still, group divisional manager Bernard Methot, estimated that, even after power was restored, only 50 percent of the plant was in operation. What’s more, management faced the unfamiliar challenge of handling demolition, ordering new construction activities and equipment and, eventually, getting machines coordinated and working effectively as a process. Not simple tasks.

Robert Barbeau, manager of personnel and labor relations, had the longer-term worry of stewarding the human resources. One-third of the company’s employees (and more than half at the Trois-Rivières plant) had been idled, among them a high percentage with specialized skills. Many would choose to look for new employment elsewhere—and both old and new employees would need to be trained or retrained on the replacement equipment that the company was ordering. Recalling recent investments in training his workforce in the techniques needed to make increasingly popular denim materials, Barbeau noted, “The fire just wiped it out.”

Managers were stretched thin, too—no longer simply “managing” an operation but having to simultaneously rebuild an older operation while constructing a new one. “Necessity is the mother of invention,” noted Fyfe. However, with that said, Fyfe and his management team quickly concluded that much of what they were attempting was beyond the scope of their own expertise; a bevy of consultants were called in to supplement the Wabasso team.

You think because you have insurance that you are well protected against any eventuality, [but] having insurance is only a means for getting some money; the problems of reconstruction fall on the people involved.

Business RealitiesAlthough Wabasso was in a “traditional” industry, it needed to be nimble. Unlike some businesses, which produce a similar range of products, often with little variation from year to year, then as now, textile firms like Wabasso had to be mindful of seasonal factors that drive the demand for different fabrics. Similarly, styles and fashions constantly shift. Having the right product mix at the right time is the difference between success and failure. And being able to supply market needs for specific materials on relatively short notice is also crucial.

What’s more, reputation for good products and for reliable and timely deliveries is critical as products enter the supply chain. At the time, Canadian retailers and catalog stores had come to rely on many goods from Wabasso. But without a well-honed and fully functional manufacturing facility, the task of keeping customers happy was daunting—and the perils for the company were enormous.

Director of marketing, A. E. Walden, described the fire as a “severe blow” to the company. “We had several large orders on our books that had to be cancelled,” he said. Furthermore, retailers, who had gradually made more space available to show Wabasso products, now reversed direction and filled much of the allotted space with competing goods. Even the sales force, with its trove of valuable personal contacts and industry knowledge, quickly began to evaporate. With little or nothing to sell, they had no choice.

Finally, Walden noted, in order to recover some market share, the company now expected to have to sharply increase spending on advertising.

An Attempt to Return to NormalThe finishing operation, where the fire started, also needed to be triaged. Here, with so little to work with on site, outside help was critical. The temporary solution turned out to be trucking large quantities of cloth hundreds of miles to a contract finisher in South Carolina (USA). Most of the loads were carried in the finisher’s trucks, in a process by which they would deliver a completed order and then carry cloth in need of finishing back south. However, in part to develop a working inventory in South Carolina, additional trucks had to be scheduled from Canada. In addition, cross-border transshipments meant bureaucratic challenges and delays.

For the sake of further efficiency, printing operations also eventually moved to contract facilities in South Carolina, necessitating even more layoffs of Wabasso workers in Trois-Rivières. On the other hand, the “gray mill,” which produced unfinished cloth, was put on three shifts, seven days a week, to keep the supply chain chugging along and to manufacture items not previously made by Wabasso, in an effort to wring some additional revenue from the still-functioning parts of the plant.

The fire likewise destroyed the sewing operation, which had been located above the finishing department. So, new equipment was procured as quickly as possible and 85,000 square feet (7,896 square meters) of temporary space secured at a location a short distance away, in a former shopping mall. But even that took months, as shipment and installation of equipment took time, and additional time was required to regain the full rhythm of production.

Another unexpected problem was the challenge of getting rid of debris and unsalvageable product and equipment. The local landfill simply could not accommodate the volume of material arriving from Wabasso. In total, clearing the site cost US$350,000 (equal to US$1,740,000 today).

However, rebuilding presented perhaps the greatest challenge. For one, efficient, modern plant layout as well as fire safety considerations demanded single-story construction. But the site was limited in size and bounded by other existing structures.

Wabasso management and outside consultants began thinking through requirements and possible configurations almost immediately. They were driven to act quickly, even before planning was complete, not only by the necessity of fully restoring operations quickly, but also by the fact that the return of the Canadian winter would make most construction activities next to impossible: A replacement building would have to be up before the snow arrived. Because there was so much cost and inconvenience associated with using a finisher in far away South Carolina, the finishing area should be completed first.

To meet all those requirement, Wabasso adopted a kind of design-build approach, eschewing competitive bidding and instead selecting reliable local contractors and negotiating their prices in comparison to similar projects. And, whenever possible, the company agreed to use the simplest construction methods; for instance, adopting standard length beams to minimize fabrication delays.

Acquiring building permits posed formidable challenges. Due to pending provincial pollution regulations, the municipality was unsure about the basis for issuing new industrial building permits and, to the usual delays, an unwillingness to act prevailed.

Panicking, and with the goad of necessity, initial construction began without a permit while management took every opportunity to emphasize the gravity of the situation; jobs and the survival of the company were on the line. Faced with the possible loss of a large local employer, authorities eventually provided the needed blessing for construction.

Despite all of these difficulties, December only saw completion of the building’s outer shell—a small triumph that allowed additional work to continue inside in the colder months.

All of this represented a tremendous drain on management, which was preoccupied with sourcing, acquiring, and investing millions in new equipment while simultaneously keeping the business afloat and headed back toward “normalcy.”

You need a business continuity and disaster recovery plan. Business disruptions can cost a lot of money, resulting from lost revenue andunexpected expenses. You can't replace customers that defect to the competition during the aftermath.

Painful Lessons“When a disaster strikes, you must anticipate what needs to be done in order to get the business running again,” says Dick Wood, vice president and risk manager at FM Global. “That means you need a business continuity and disaster recovery plan. Business disruptions can cost a lot of money, resulting from lost revenue and additional unexpected expenses that reduce profits.” In the case of Wabasso, revenue was down and expenses were up. “And, too often, you can’t replace customers that defect to the competition during the aftermath,” says Wood. In addition to facility losses, Wabasso lost their key sales staff and other trained employees, because people moved elsewhere. And they ran into issues such as the need for environmental permits that would not have otherwise come up.

A business continuity and disaster recovery plan isn’t just about the immediate response, it’s what you must do to recover your business, he explains. “Some people simply call this resiliency planning. In any case, it is a road map for continuing operations under adverse conditions,” says Wood.

The real key, of course, is to make sure you don’t have a loss in the first place.

Ronnie Gibson, FM Global vice president and chief engineer, says an unfortunate truth is that much hasn’t changed since the Wabasso fire in 1973. “The real-life impact of what happens in a business disruption event are the same today, and with the ever-faster pace of business, the challenges may be even greater,” he says. Furthermore, the factors that can contribute to a loss haven’t changed much, either. “In the case of Wabasso, it was an unfortunate combination of events: an unexpected fire, started during a break, when no one was there to notice, during a time when there was an ongoing project which had led to the sprinkler valve being closed,” he said.

At the time, FM Global had recommended locking and checking valves, “but, up to that point, we asked clients to mail in the details of their impairments, and we checked their records during our loss prevention visits,” he notes. Following the Wabasso fire, the process was enhanced; clients were asked to phone in sprinkler system impairments and FM Global would actively monitor the impairment, calling back periodically to make sure the protection had been reinstated, a service that is provided to this day.

“Valve supervision remains central to preventing a runaway fire,” says Gibson. If you install a million dollars worth of sprinkler protection, but leave open the chance of a valve being shut maliciously or in error, that investment runs the risk of being worthless,” he says.

“Although our clients are considered among the most diligent in maintaining their fire protection, our engineers still find over 1,000 improperly closed valves each year during routine loss prevention visits,” he adds.

After its fire, Wabasso management committed to an even higher level of loss prevention. Weekly inspections of sprinkler valves became part of operational routines, and clearly labeled safety equipment and expanded training also became part of the renewed facility.

It was a hard-won lesson, and a lesson still applicable to any industrial facility: Loss prevention is a good investment, and the cost of inadequate loss prevention can be truly devastating to an enterprise.

Wabasso was fully back in business in little more than a year. But things were never the same. The aftermath of the fire had done severe damage to market share—and competition had never let up. By the early 1980s, Wabasso was in trouble, was eventually acquired and merged into the operation of a larger organization.

Today, the company is only a memory in Trois-Rivières; the site of its sprawling plant long since turned into a strip mall. But the hard lessons of Wabasso remain instructive for any organization.